Liquidation proceedings require company action through the official liquidator; a shareholder cannot appeal for company assets without sanction.
A company in liquidation retains separate corporate existence, and proceedings concerning its property or rights must be taken in the company's name through the official liquidator. The liquidator is entitled to custody of the company's assets, and any institution or continuation of proceedings requires the necessary sanction of the winding-up court. A shareholder has no proprietary interest in those assets and cannot, merely because he was impleaded as a plaintiff, maintain an appeal for reliefs belonging to the company. As no leave was obtained for the shareholder to appeal in that representative capacity, the appeal was held incompetent for want of locus standi.
Issues: Whether a shareholder who was impleaded as a plaintiff could maintain an appeal on behalf of a company in liquidation without leave of the winding-up court and without the appeal being filed in the name of the company.
Analysis: A company in liquidation retains its corporate existence, and proceedings relating to its property or rights must be taken in the name of the company through the official liquidator. Under section 178(1) of the Indian Companies Act, 1913, the liquidator takes custody of the company's property, and section 179 authorises institution or continuation of proceedings in the name and on behalf of the company with the necessary sanction. A shareholder has no proprietary interest in the company's assets and cannot, merely by reason of being a party to the suit, prosecute an appeal for reliefs belonging to the company. The sanction obtained earlier was for the liquidator to sue on behalf of the company, and no leave was obtained for the shareholder to appeal in that representative capacity.
Conclusion: The shareholder had no locus standi to maintain the appeal on behalf of the company, and the appeal was incompetent.
Final Conclusion: The preliminary objection was upheld, and the appeal failed for want of competence.
Ratio Decidendi: In liquidation proceedings, only the company acting through the official liquidator, with the requisite sanction, can sue or appeal in respect of the company's assets, and a shareholder has no independent right to do so.
TaxTMI 
AI Drafter ✕
TaxTMI 
